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Is The New York Times Company Good Enough for You?

Keep your eye on margins.

Margins matter. The more The New York Times Company(NYSE: NYT) keeps of each buck it earns in revenue, the more money it has to invest in growth, fund new strategic plans, or (gasp!) distribute to shareholders. Healthy margins often separate pretenders from the best stocks in the market. That's why we check up on margins at least once a quarter in this series. I'm looking for the absolute numbers, comparisons to sector peers and competitors, and any trend that may tell me how strong The New York Times Company's competitive position could be.

Here's the current margin snapshot for The New York Times Company and some of its sector and industry peers and direct competitors.

Company

TTM Gross Margin

TTM Operating Margin

TTM Net Margin

The New York Times Company

59.0%

10.2%

(1.3%)

Gannett(NYSE: GCI)

44.8%

18.4%

9.7%

The Washington Post Company(NYSE: WPO)

57.7%

7.7%

3.1%

Pandora Media(NYSE: P)

40.3%

(1.8%)

(4.4%)

Source: S&P Capital IQ. TTM = trailing 12 months.

Unfortunately, that table doesn't tell us much about where The New York Times Company has been, or where it's going. A company with rising gross and operating margins often fuels its growth by increasing demand for its products. If it sells more units while keeping costs in check, its profitability increases. Conversely, a company with gross margins that inch downward over time is often losing out to competition, and possibly engaging in a race to the bottom on prices. If it can't make up for this problem by cutting costs -- and most companies can't -- then both the business and its shares face a decidedly bleak outlook.

Of course, over the short term, the kind of economic shocks we recently experienced can drastically affect a company's profitability. That's why I like to look at five fiscal years' worth of margins, along with the results for the trailing 12 months, the last fiscal year, and last fiscal quarter. You can't always reach a hard conclusion about your company's health, but you can better understand what to expect, and what to watch.

Here's the margin picture for The New York Times Company over the past few years.

Because of seasonality in some businesses, the numbers for the last period on the right -- the TTM figures -- aren't always comparable to the FY results preceding them. Here's how the stats break down:

Over the past five years, gross margin peaked at 59.8% and averaged 57.6%. Operating margin peaked at 11% and averaged 9.9%. Net margin peaked at 6.6% and averaged -1.3%.

TTM gross margin is 59%, 140 basis points better than the five-year average. TTM operating margin is 10.2%, 30 basis points better than the five-year average. TTM net margin is -1.3%, about the same as the five-year average.

With recent TTM operating margins exceeding historical averages, but net margins still negative, The New York Times Company still has some work to do.

If you take the time to read past the headlines and crack a filing now and then, you're probably ahead of 95% of the market's individual investors. To stay ahead, learn more about how I use analysis like this to help me uncover the best returns in the stock market. Got an opinion on the margins at The New York Times Company? Let us know in the comments below.